Facing the Online Music

The Inc. Survey

The battle over online music may seem to be about college kids illegally downloading Eminem. But entrepreneurs also have a stake in the debate. And interestingly, they seem somewhat skeptical of the recording industry's efforts to rewrite intellectual property law.

Some history: Napster first enabled people to share digital music files over the Internet in 1998. In response, the Recording Industry Association of America won passage of the 1998 Digital Millennium Copyright Act, which affirmed stringent copyright protection. The group successfully sued Napster. More recently, it has tried to quash file-sharing services such as Kazaa and Gnutella.

Some might assume entrepreneurs would back the recording industry, since intellectual property is often a small company's only significant asset. Yet a new survey of Inc. subscribers found a lack of support for efforts to curtail file sharing. Fully 40% of respondents say sharing music files with friends and co-workers does not constitute copyright infringement.

What's more, those surveyed are not keeping employees from using the company network to download music. Though only 17% say they know for sure that employees download media files, 63% do not block access to file-sharing sites, and 64% have no policy prohibiting employee downloads. The RIAA has warned companies that failing to take these steps could provoke legal action in the future.

A backlash against the recording industry may explain the results. Big companies like Intel, Gateway, and Apple certainly worry that the RIAA will go too far in restricting the new technology. Mindful that digital music drives PC sales, they have lately come to the defense of so-called fair-use rights, the basic privileges afforded a purchaser of copyrighted material. "A lot of people think there's something unethical about their CD burner, and that's just not true," says Gateway spokesman Brad Williams.

Among entrepreneurs, the concern seems to be that the RIAA would, in the words of Mark Heesen, president of the National Venture Capital Association, "sue new innovation into oblivion." Indeed, music labels Universal Music and EMI are suing the venture capital firm Hummer Winblad simply for funding Napster. In a statement, the labels argue that "businesses (as well as those individuals or entities that control them) premised on massive copyright infringement...should face the legal consequences for their actions."

Heesen argues that the suit is simply the work of "an 800-pound gorilla who has a vested interest in an existing technology and is using its might to crush any new technology that makes theirs obsolete." For entrepreneurs, the scenario is all too familiar -- it's no wonder they don't feel the RIAA's pain.